How To Convert Fullscreen Dvd To Widescreen With H.264 Encoder?

Hi, I have a bunch of Movies that I would like to encode with h.264 to play back on my mac mini media center. Unfortunately they are letterboxed videos, or psuedo widescreen (Widescreen movies, but in 640x480) instead of anamorphic. I would like to crop off the top and bottom black bars, and encode it. I understand that the quality of the movie will suffer because the picture will be stretched, but I prefer this instead of watching a movie that is window boxed( Black bars on sides and top/bottom.

I've tried to encode it with 640x360 resolution while selecting "preserve aspect ratio - CROP", but once the video is done, the video is still windowboxed. How can I remove these black bars? I assume that there is something wrong with my settings. Any help is appreciated.